DCIT Vs Surat Road King (ITAT Mumbai)
Key Issue: Depreciation on Assets Registered in Partners’ Names
The core of the dispute for the Assessment Year (AY) 2014-15 was the disallowance of depreciation amounting to on trucks. The Assessing Officer (AO) disallowed the claim on the grounds that the vehicles were registered in the name of the partners and not the partnership firm, thereby concluding the firm was not the legal owner and ineligible to claim depreciation under Section 32(1) of the Income Tax Act, 1961.
The assessee, Surat Road King, a transport services provider, contended before the Commissioner of Income Tax (Appeals) [CIT(A)] that although the registration was in the partners’ names for convenience, the trucks were purchased by the firm, reflected in its block of assets and balance sheet, and the purchase consideration and finance interest were paid by the firm. The CIT(A) was convinced by the evidence of ownership and regular business use by the firm and consequently deleted the disallowance.
ITAT Ruling and Judicial Precedent
The ITAT upheld the CIT(A)’s finding, citing the Supreme Court’s landmark decision in Mysore Minerals Ltd. vs. CIT (1999) 239 ITR 775 (SC). This precedent established that the term ‘owned’ in Section 32(1) has a wider meaning. Depreciation is legitimately claimable by the party who invested in the asset, is utilizing it for business, and is bearing the loss from wear and tear, even if the formal registration is not yet in their name. The Tribunal noted that the subsequent coordinate bench decision in Edwise Consultant Pvt. Ltd. (2017) 83 taxmann.com 27 (Mumbai – Trib.) had overruled the earlier contrary decision relied upon by the Revenue.
